British Pound weakens against Japanese Yen as latter outperforms

The British Pound slumps to near 210.30 against the Japanese Yen.
The BoJ is expected to leave interest rates unchanged in the policy meeting later this month.
Hot UK CPI data prompts BoE’s interest rate hike expectations.

The British Pound (GBP) is down 0.5% at around 210.30 against the Japanese Yen (JPY) during the European session on Thursday. The cross faces selling pressure as the Japanese currency outperforms even as the Bank of Japan (BoJ) is expected to leave interest rates unchanged at 1.25% next week.

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Japanese Yen Price Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.03%	-0.11%	-0.75%	-0.22%	0.15%	0.18%	-0.54%
EUR	0.03%		-0.10%	-0.74%	-0.22%	0.18%	0.20%	-0.55%
GBP	0.11%	0.10%		-0.65%	-0.14%	0.25%	0.26%	-0.45%
JPY	0.75%	0.74%	0.65%		0.55%	0.93%	0.94%	0.22%
CAD	0.22%	0.22%	0.14%	-0.55%		0.38%	0.42%	-0.33%
AUD	-0.15%	-0.18%	-0.25%	-0.93%	-0.38%		0.03%	-0.70%
NZD	-0.18%	-0.20%	-0.26%	-0.94%	-0.42%	-0.03%		-0.70%
CHF	0.54%	0.55%	0.45%	-0.22%	0.33%	0.70%	0.70%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

According to the latest Bloomberg survey, all economists favored that BoJ leaving interest rates unchanged in the policy meeting on October 30. However, 83% of economists in the survey expect the Japanese central bank to raise its 1.25% policy rate in December, up from 35% last month.

Latest remarks from BoJ Governor Kazuo Ueda also reinforced expectations that the central bank remains on the monetary tightening path.

BoJ’s Ueda leans mildly hawkish as inflation nears target

FXS Speechtracker shows this speech scoring slightly below Governor Ueda’s historic average, but the emphasis on “underlying inflation near 2%” and a “positive loop” of wages and prices marks a mildly hawkish tilt versus past communication. The focus on anchoring core inflation near 2%, alongside recognition of robust global demand, tight labor markets, and demand-led price pressures, reinforces a narrative that the BoJ is edging closer to conditions that justify further normalization.

At the same time, the insistence on no shift in the fundamental bond taper approach and the refusal to preannounce emergency bond measures underline a cautious, data-dependent stance that tempers the hawkish tone. For the YEN and JGBs, the message is that financial conditions will remain accommodative for now, but that improper calibration of the policy rate could see long-term yields rise, so credible progress toward the 2% target is being used to justify a gradual, controlled path toward higher rates and a more stable JGB market.

On Wednesday, BoJ Deputy Governor Ryozo Himino also warned against any change in the current monetary policy path.

Himino flags AI-driven inflation risks, lifting Yen outlook

BoJ’s Himino scores in line with the 8.2 FXS Speechtracker baseline, but the emphasis on rising medium- and long-term inflation expectations and upside price risks marks a clear hawkish tilt. References to strong AI-related capex and exports, underlying inflation nearing the 2% target, and the warning that postponing policy changes could damage the economy all argue for earlier normalization, supporting a firmer Yen and higher Japanese yields.

The acknowledgment that financial conditions remain accommodative, real rates are still low, and bank lending is expanding rapidly reinforces the case that current policy may be too loose in the face of elevated price risks. The message that suitable monetary policy is needed to secure stable prices and sustainable growth signals a BoJ more willing to tighten if inflation stays near or above target, which should keep Yen bears cautious and support a gradual repricing of the BoJ path.

Meanwhile, the likelihood of the Bank of England (BoE) raising interest rates in the November policy meeting has improved due to hot United Kingdom (UK) Consumer Price Index (CPI) data for September released on Wednesday.

UK inflation surprise reinforces November BoE hike expectations

Analysts at Deutsche Bank highlight that the latest UK inflation data surprised to the upside, noting that the September CPI print "rose more than expected to +3.5% in September (vs. +3.4% expected)." They point out that this was "the highest level for headline CPI in nearly a year," while "the core CPI print also hit a 6-month high of +2.8%, although that was in line with expectations." According to the bank, this combination of stronger inflation and earlier robust labour market figures "helped to cement investor expectations for a BoE rate hike in November," with markets increasingly convinced that policymakers will move at the next meeting.

Central banks FAQs

What does a central bank do?

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

What does a central bank do when inflation undershoots or overshoots its projected target?

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

Who decides on monetary policy and interest rates?

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Is there a president or head of a central bank?

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.